Improved productivity a must as commodities fall

The pressure to improve productivity and adaptability is increasing substantially in the mining industry, where downwards pressure on commodity prices is expected to continue in the short-term.

The price of iron ore fell by US$1.90 per tonne overnight to US$131.90. Commodity prices have been under significant pressure recently due to a heavy increase in supply and volatile demand.

The fall overnight has led to shares in iron ore miners falling on Monday. BHP Billiton (ASX: BHP) has fallen 1.3% and Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) have dropped 2.1% and 3.5% respectively. Meanwhile, diversified mining services company Ausdrill (ASX: ASL) has plummeted 5.8% to trade at $1.56 per share.

The need to improve productivity and adaptability as well as to reduce unnecessary capital spending were each highlighted in BHP’s annual report, which was released last week. The report stated that, “increased supply has, however, exerted downward pressure on many commodity markets more recently and we expect this trend to continue over the short term. While lower rates of investment across the industry will ultimately lead to more balanced markets, all resources companies will need to improve productivity and be flexible enough to adapt to change in this more challenging environment.”

Not so keen on the miners for your portfolio? Instead, discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.